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Indian stock market, which opened lower on weak global cues, continues to languish in negative territory during the post noon trading session. Sectoral indices are trading on a mixed note with stocks from the auto and IT trading in the green while infrastructure sector bearing the maximum brunt.
The BSE Sensex is trading higher by 88 points (up 0.3%) and the NSE Nifty is trading lower by 5 points (down 0.1%). The BSE Mid Cap index is trading higher by 0.1%, while the BSE Small Cap index is trading lower by 0.2%. Gold prices, per 10 grams, are trading at Rs 31,720 levels. Silver price, per kilogram, is trading at Rs 46,700 levels. Crude oil is trading at Rs 3076 per barrel. The rupee is trading at 67.42 to the US$.
As per an article in The Economic Times, the tyre industry is set to import more rubber owing to the decline in rubber production in the country. Availability of rubber stocks has been a key concern for the Automotive Tyre Manufacturers Association (ATMA). The industry has conveyed its intention to go for more imports if the situation does not improve.
Moreover, since January, natural rubber prices in the country are up 35% with rates rising to Rs 143 per kg from Rs 130 over the last week. However, import of natural rubber went down 6% in April-May from a year ago.
It was reported that rubber price in the international market is more than Rs 50 cheaper than in India. Consequently, imports might go up in the coming months to meet the demand. In one of our premium edition of The 5 Minute Wrap Up, we have offered the bits on the rising concern on the prices of natural rubber. (Subscription Required)
The country's natural rubber production dropped by 13% to 0.6 million tonnes in 2015-16, while imports surged up to 0.5 million tonnes, from 0.4 billion tonnes in 2014-2015.
As against 1.2 million tonnes of annual consumption, India's natural rubber production stands at 575,000 tonnes. Thus, India has no option but to import natural rubber, the report stated.
Moving on to the news from power sector. According to a leading financial daily, developers like Suzlon Energy and Inox Wind are concerned with the changing incentive structure in the wind energy sector and investors' retort to it.
Reportedly, Suzlon and Inox Wind offer turnkey wind energy solutions. In this, companies acquire land, set up a windmill and sell it to investors. They in turn deduct accelerated depreciation on the project from their taxable income or profits. The union budget halved the accelerated depreciation such investments can need from next fiscal.
Part of the reason for lower investor interest is also included government's thrust on solar capacity addition. The wind energy sector is more than five-fold in size (27 gigawatt) compared to solar power. But with rapidly declining tariff witnessed in the latter over the last year, it is fast becoming the favourable investment destination. Thus adversely impacting the wind power sector. While solar tariff touched a low of Rs 4.35 per unit, wind power continues to cost over Rs 5 per unit.
Another issue is ambiguity on the extension of generation based incentive (GBI). As per the current policy, the wind developers are entitled to receive an incentive of Rs 0.50 per unit for a unit of electricity generated.
As per the reports, the bulk of the reason for low investor interest is the lack of proper policy direction with respect to the continuation of GBI beyond 2016-17 fiscal.
Moreover, the Centre has set an ambitious target of achieving 175 GW capacity from renewable energy resources by 2022 and of this, 60 GW is seen to come from wind power.
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